Westpac subsidiary BT Financial taken to court over telephone sales campaign
The corporate watchdog has started legal action against Westpac and its subsidiary BT Funds Management for breaching the "best interests" obligation and providing financial advice when they were not permitted to do so.
BT rejected the interpretation, saying consumers would have known they were only getting general advice.
BT Financial Group chief executive, Brad Cooper, said this will be an important test case for the industry.
"More and more we are finding people want to have a natural and practical conversation without having to pay for comprehensive personal advice," he said through a statement.
"Super fund consolidation is in the best interests of many Australians and along with regulators and industry, we have built programs to inform and support customers to consolidate or roll over their superannuation."
The Australian Securities and Investments Commission [ASIC] has started legal action in the Federal Court's New South Wales registry alleging Westpac Securities Administration Limited [WSAL] and BT breached their duty during a telephone sales campaign targeting superannuation fund members.
"ASIC's case sets out 15 examples of alleged contraventions of the 'best interests duty' arising from two telephone campaigns instigated by [Westpac] and BT Funds Management [BTFM]," the regulator revealed on Thursday afternoon.
During the telephone sales campaigns the two firms recommended customers roll out of other funds and into a Westpac-related super fund. WSAL operates the Westpac Lifetime Superannuation Service.
"Westpac Securities Administration Limited and BTFM are not permitted to provide financial advice under their Australian financial services licences. Further, ASIC alleges that [Westpac] and [BT] did not undertake a proper comparison of the superannuation funds as required by law."
However, Mr Cooper rejected that interpretation.
"In each of the 15 conversations ASIC is using as the base of its case, our customers were given a 'general advice warning' as is standard and a required part of our process. We are disappointed that we have not been able to resolve the difference of opinion as to the operation of the law with ASIC. We look forward to having the issue determined by the court to obtain important clarity for the industry."
The first hearing will be held in Sydney on February 2, 2017. This court action grew out of ASIC's 2014 decision to improve standards in Australia's financial advice sector.
On Thursday ASIC also revealed it had secured $530,000 in penalties from Suncorp-Metway after it failed to tell consumers it was changing their loan repayment amounts, which led to some defaults on direct debits.
Suncorp has paid $270,000 for twenty breaches of the National Credit Code and spent $260,000 refunding default fees and interest consumers occurred because of its behaviour.
Between November 2015 and March 2016 Suncorp changed loan repayments, but failed to tell customers.
"As a result of these failures, consumers were not given the opportunity to prepare for a change in their repayment obligations or may not have been aware that their direct debit payment had failed. Subsequently, some consumers were subject to collections activity, including telephone calls or letters from Suncorp's debt collection staff," ASIC advised.
Suncorp discovered the breach and self-reported it to ASIC.